Business Irish

Friday 24 March 2017

An alternative take on economics, but black stuff remains a mystery

Journalist bringing complex theories to a virgin audience

John Mulligan

John Mulligan

Sipping a fresh glass of Guinness in a swanky Dublin hotel after disembarking the plane from London a couple of hours earlier, Stephen Dubner is trying to decide whether it tastes any different than anywhere else in the world.

He's not so sure.

It's not, he assures, that there's anything wrong with the Guinness. Rather, it's his taste buds that are the culprit.

He loves his wine and beer (and Scotch), but confesses his tongue isn't developed enough when it comes to distinguishing subtle variations.

But detecting variations, at least to some extent, has become part and parcel of Dubner's work.

On a whirlwind visit to Dublin to give a lecture and to promote his latest collaboration with renowned Chicago-based economist Steven Levitt -- 'SuperFreakonomics' -- the genial Dubner is eager to talk, as one suspects he almost always is.

Winning formula

A journalist who writes for the 'New York Times' and has written for many others, he hit on a winning formula with Levitt, generating millions of book sales of their titles that have brought economic theory to an often virgin audience for the subject matter. A movie documentary based on their first book, 'Freakonomics', is also due for release in October.

Sometimes unfairly dismissed as 'pop-economics', the pair rely on an approach encompassing a diversity that includes the work patterns of prostitutes, the environment, child car seats and a raft of other topics and tangents to explain the why and how economics impacts everyday lives.

The writing partnership between Dubner and Levitt that began a number of years ago with 'Freakonomics' has captured the imagination of readers, including, often, teenagers who may never even have read a book before in their lives, says Dubner. It's all obviously exciting for the writer, who confesses that his affinity with economics is never easily subdued.

"It's a great deal of fun to have a lens through which to look at the world," he explains. "I would argue that almost everyone, in their personal life or professional life, has a lens, or is searching for a lens, through which to view the world, because you know why? It's too chaotic if you don't."

That lens through which Dubner has looked has revealed insight that for he and Levitt has in turn generated envy among economists, and opened doors, or at the very least left them ajar, to government.

Academia

"If you've got a very strong envious streak in general, then academia is a great line of work to go into because you can exercise it every day," he jokes, pointing out that one of the reasons some economists may not like their work is because it reveals that economics "isn't so hard".

More seriously, though, Dubner is acutely aware that politicians and governments present one of the biggest dangers to free market mechanics.

"Political incentives are usually perversely wrong. You want to make big noisy signals that satisfy your harshest critics," he says, even adding that measures used to prop up ailing economies can deliver the wrong long-term result.

"So much of economic movements are cyclical. The problem is, if you are in the depths of a cycle and you panic and pile on a bunch of measures to resuscitate a cycle that would have resuscitated on its own, then you have helped accelerate the next downturn."

Dubner is suitably wary that politicians even grasp that concept. He adds that in the US, for instance, the economy was inherently a lot stronger in 2008 than it was during the Great Depression, and that comparisons between the 1930s and the modern economy were fraught with difficulty.

"The acts that produced the recession, from the individual level to the regulatory level and to firms, were all inspired by very fundamental human desires to have a little bit more than we're entitled to have," he adds.

State intervention

He is unsure, too, whether the amount of state intervention witnessed around the world from Ireland to Greece in the past couple of years was necessarily the right thing to do.

However, he points out that in the US, one of the most contentious government bailouts was the one that funnelled tens of billions of dollars to the automotive industry. That resulted in the US taxpayer taking majority stakes in both General Motors (GM) and Chrysler in return for aid, with the Canadian government also chipping in. Much of the cash has already been returned to the two governments by GM, although the taxpayer will still be left out of pocket.

"I listened to very smart economists argue ferociously against the bailout. Now, it's looking like it might not have been a terrible idea."

Indeed, such surprises are always part of economic practice. Frequently, as in science, the facts are firmly eschewed by those who wish to believe otherwise.

Dubner and Levitt point out in their latest book, for example, that crash tests they had undertaken in the US on children's car seats revealed that for kids between the ages of three and six, adult seatbelts exceeded every requirement for how a child seat should perform in a 30-mile-an-hour head-on collision.

Had they submitted the data to the government dressing it up as the results of a 'new' child safety device (a seatbelt), they reckon it would have received instant approval.

But Americans still spend more than $300m (€246m) a year buying four million car seats, when it's possible that a simpler, cheaper solution could easily suffice -- adapting rear seat belts to fit children.

Dubner's own children turn up later at the tail-end of the interview, at which point he admits to having played the role of the Artful Dodger in his youth (his kids have just seen 'Oliver' in London's West End).

Contradiction

Growing up in rural upstate New York to US-born Roman Catholic parents who had converted from Judaism, Dubner rejoined the Jewish faith in later years, and concedes that there is probably some contradiction for a person who deals so much in facts and figures to be an active participant in religion.

"Yes, it is a contradiction and that's why I'm not an economist by trade," he freely explains.

"I do very much appreciate and pursue the more ethereal elements of life, but to me, my religious journey was an effort to put my family's faith within a factual framework."

When he was growing up he was encouraged to believe God and to believe in an afterlife.

And now?

"The afterlife? It's impossible to prove a negative, but I'm not betting on it. I believe that a belief in God can be a very useful thing.

"But this is where the economics part comes in: I also believe that people have different preferences, and one of the great failings of humankind is our inability as individuals to appreciate that other people can have very different preferences to us and yet they can be valid."

He says that the US remains politically polarised, but that the world would be a happier place if we could come to the fundamental realisation that preferences are not as rigid as mathematics.

"That's where economics is not the be all and end all."

What still surprises Dubner most about people's general economic interactions with each other is how sane we are -- generally, at least.

Being able to hire a taxi in any city in the world or to eat food anywhere in the world even though you didn't grow it, are just two of the examples that for Dubner strike him as enormously illustrative of our embrace of economics.

"We pass up countless opportunities to cheat, steal and lie every day. You can chalk it up to the beauty of the market with the firm hand of government authority behind it," he muses.

Topically, for Ireland, as regulators examine the possibility of imposing borrowing limits on consumers, Dubner thinks such moves could be good.

"If firms are not capable of drawing a line, and it's not really their job to do so, then governments need to help do it."

But despite all it can achieve, Dubner has a parting thought on economics as he toys with his glass of Guinness: "It's too limiting when it's not combined with some humanism. Economists who think only like economists miss out on a great, great deal."

Irish Independent

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